Population ageing due to lower birth rates and longer life expectancies will continue to raise fiscal pressures on pension systems at a time of high public debt and competing spending needs, according to a new OECD report.
OECD Pensions at a Glance 2025 shows that populations across the OECD will age fast over the next 25 years: there will be 52 people aged 65+ for every 100 people aged 20-64 by 2050, up from 33 in 2025 and only 22 in 2000.
The projected increase by 2050 is particularly strong in Korea, by almost 50 points, and in Greece, Italy, Poland, the Slovak Republic and Spain by more than 25 points.
"Population ageing is a key structural challenge across OECD countries, with significant economic, fiscal and social implications. With the working-age population estimated to fall by 13% over the next 40 years, and GDP per capita expected to drop by 14% by 2060 as a result, countries will face downward pressure on their revenues while spending on ageing related expenditures is going up," OECD Secretary-General Mathias Cormann said. "As we live longer, and live longer healthier, we need to work longer. Countries need to increase effective retirement ages and strengthen opportunities to work at older ages to enhance the financial sustainability of pension systems, ensure financial security in old age, and support strong economic growth."
The working-age population of people aged 20-64 is projected to fall by over 30% over the next 40 years in Estonia, Greece, Italy, Japan, Korea, Latvia, Lithuania, Poland, the Slovak Republic and Spain.
The normal retirement age will increase in the average OECD country from 64.7 and 63.9 years for men and women retiring in 2024 to 66.4 and 65.9 years, respectively, for people starting their career in 2024, based on current legislation.
Future normal retirement ages range from 62 in Colombia (for men), Luxembourg and Slovenia to 70 years or more in Denmark, Estonia, Italy, the Netherlands and Sweden.
On average across OECD countries, full-career average-wage workers entering the labour market today will receive a net pension at 63% of net wages. This future net replacement rate is below 40% in Estonia, Ireland, Korea and Lithuania. The future net replacement rate of full-career workers at half the average wage is higher, at 76% on average.
This edition of Pensions at a Glance includes a focus on the gender pension gap. Women receive monthly pensions that are 23% lower than men's on average across OECD countries, despite declining by 5 percentage points from 28% in 2007.
Gender differences in lifetime earnings - due to differences in employment, hours worked and hourly wages - are estimated at 35% on average across OECD countries and are the main driver of the gap. Unequal sharing of unpaid work also has large implications.
Countries will need to put in place a comprehensive strategy encompassing labour market, family and pension policies to resolve this pension gender gap.
Policy priorities for countries seeking to unlock the untapped labour market potential of women and reduce gender gaps in the labour market and in pension incomes include more affordable childcare, fewer disincentives to work in the tax and benefit system, encouraging enrolment in technical, in-demand subjects, and ensuring equality of opportunity for leadership positions. Eliminating earlier access to pensions for women, where this is the case, would also reduce the gender pension gap.
Protecting survivors' standards of living following a partner's death is also key. Survivor pensions reduce the gender pension gap in mandatory earnings-related schemes by about one-third on average, as women account for 88% of recipients on average.
